Japan unveils US$29 bln spending package

Japan will try to boost the economy with a 3.5 trillion yen (US$29 billion) fiscal stimulus package after consumption plunged following a sales tax hike in April.

The measures include shopping vouchers, subsidized heating fuel for the poor and low interest loans for small businesses hurt by rising input costs, Bloomberg News reported.

The package is aimed at boosting gross domestic product by 0.7 percent, Economy Minister Akira Amari was quoted as saying on Saturday. The money will come from tax revenue and unspent budget, he said, adding that there will be no need to issue new bonds.

“This will support private consumption and boost regional economies, so that the virtuous economic cycle spreads to all corners of the nation,” Prime Minister Shinzo Abe said.

About 1.7 trillion yen will be spent on public works in areas damaged by natural disasters and to improve disaster preparedness, with 600 billion yen for revitalizing regional economies and 1.2 trillion yen to support people and small businesses hurt by the current economic situation, the news agency said, citing documents released by the Cabinet Office.

In November Abe delayed a plan to further raise the sales tax by 18 months after data showed the economy fell into recession. GDP shrank an annualized 1.9 percent last quarter, more than initially estimated, after a 6.7 percent contraction in the three months from April, when the levy was raised for the first time since 1997.

The postponement prompted Moody’s Investors Service to cut its credit rating on Japan, the report said.

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